Building a Strong Employee Retention Strategy

Employee retention is not just a number. It reflects a company’s culture, leadership, and the value offered to the team. High retention means you’re doing something right. Low retention? That’s a sign to dig deeper. Let's break down what employee retention is, why it matters, and, most importantly, how to keep your best people around.

What is Employee Retention?

Employee retention refers to the percentage of team members who stay at your company over a specific period. It is often mentioned alongside 'turnover,' which measures how many people leave—voluntarily or involuntarily.

While turnover focuses on who’s leaving, talent retention is all about keeping people engaged, motivated, and committed to staying. When you prioritize retention, you’ll naturally reduce turnover, leading to stronger teams and a more stable, productive workplace. Retention is especially critical in small businesses, where each team member plays a significant role in shaping the sense of community, strengthening company culture, and driving long-term growth.

How is Talent Retention Measured

Unlike some aspects of company culture, talent retention can be measured with an explicit formula:

• Retention rate = (Number of employees who stayed during a period ÷ Number of employees at the start of the period) x 100

For example, if you began the year with 100 employees and 85 are still with you, your retention rate is 85%. What is considered a “good” retention rate can vary by industry, but anything above 90% is generally substantial. 

Why Employee Retention Matters

Losing top talent isn’t just unfortunate; it’s costly. The turnover comes with a price tag that includes recruiting, training, and the productivity dip that happens while you search for a replacement. Beyond the financial impact, each departure can disrupt team dynamics, take valuable knowledge out the door, and lower morale, especially if employees see their peers leaving.

With small businesses, these challenges can hit even harder. With leaner teams and tighter resources, every person plays a crucial role, and replacing them can stretch time, budgets, and team capacity. Over time, frequent turnover can weaken your employer brand and make it harder to attract top talent. Strong talent retention helps cut costs, protect company culture, and build a more stable foundation for long-term success.

How to Retain Your Best Employees

There is no one-size-fits-all solution, but a thoughtful employee retention program can make a difference. If you’re building one from scratch or just looking to improve what you already have, here are a few elements worth focusing on:

1. Prioritize a Strong Onboarding Process

First impressions matter. A smooth, thoughtful onboarding experience helps new hires feel welcomed, supported, and confident right from the start. It’s not just about paperwork. It’s about introducing your employees to team culture, clarifying their roles, and creating early opportunities for success. This cultural onboarding helps new employees find their footing and feel a sense of purpose from day one.

2. Offer Competitive Compensation and Additional Benefits

While compensation is still necessary, employees expect more than just a paycheck. Flexible work options, mental health resources, wellness stipends, and perks like learning budgets or student loan support can all improve retention.

Benefits beyond salary demonstrate a commitment to your team’s overall well-being and sustained growth, not just their output. Make it a habit to revisit your benefits package to keep up with your team's needs and values, just like Justworks does. Justworks PEO offers additional benefits with partners like Kindbody, Peloton, Talkspace, and One Medical to provide extra support beyond the basics.

3. Provide Growth and Learning Opportunities 

Top performers are more likely to stay when they can see a clear path for growth within your company. Offering career development programs, mentorship opportunities, and chances for internal advancement shows your commitment to their growth.

With smaller teams, creating growth opportunities does not have to mean large, formal programs. Instead, consider cross-training, stretch projects, or giving employees a say in shaping their roles as the company grows.

4. Build a Positive Work Culture

Employees stay where they feel valued, respected, and supported. A culture that celebrates wins promotes psychological safety(where employees feel comfortable taking risks, sharing ideas, and speaking up without fear of judgment) and fosters inclusivity, giving everyone a chance to thrive. Recognition programs, open communication, and meaningful Diversity, Equity, and Inclusion (DEI) initiatives all create a workplace where employees feel proud to be part of the team.

5. Support Work-Life Balance

Whether your company operates remotely, in a hybrid model, or through the office, providing flexibility is essential to supporting work-life balance and reducing turnover. This flexibility can also be a key differentiator for small businesses, allowing employees to manage their personal and professional lives in a way that larger companies may struggle to match.

Encourage managers to lead by example and avoid sending non-urgent messages outside work hours. Respecting employees' time builds trust and encourages loyalty.

6. Make Communication a Priority

Strong communication is one of the eight essential HR skills and a critical factor in supporting employee retention. Employees who feel heard and informed are generally more engaged and committed to your organization.

Communicate regularly through check-ins, town halls, and employee pulse surveys to gather honest feedback. Most importantly, the feedback loop can be closed by taking meaningful action and keeping employees updated.

Signs Your Employee Retention Strategy Needs a Refresh

Where are your retention challenges coming from? Start by looking for a few common warning signs. If any of the following sounds familiar, it might be time to reassess your approach:

• Turnover spikes in the same departments

• Exit interview questions reveal recurring themes, such as dissatisfaction with salary, cultural misalignment, or limited growth opportunities.

• Dropping employee engagement scores

• Promising employees leaving within their first year on the job

These signs aren’t just red flags. They’re opportunities to make changes before more talent walks out the door.

How Justworks Helps with Employee Retention

Employee retention doesn’t happen by accident. It results from intentional culture-building, thoughtful leadership, and a commitment to adapting to your team’s needs. In smaller teams, where each individual’s contribution is more impactful, fostering retention becomes even more critical to long-term success. When you put the effort into investing in your people, they’ll invest in your business right back.

Justworks' Professional Employer Organization (PEO) helps small businesses boost employee retention by streamlining HR processes, improving compliance and risk management, and offering professional development and training opportunities. Our seamless onboarding tools, competitive health insurance options, and beyond-basic benefits help attract and keep top talent. Ready to boost your retention rates and build a more stable, engaged workforce? Get started with Justworks today.